Manipulators stock it up in volatile market

NEW DELHI: We have been hearing about it for a while but it seems to be official now. The recent volatility in the stock markets appears to have made manipulators active.

A number of brokers, based in Mumbai, Delhi, Chennai and Ahmedabad, have colluded with promoters of small companies to manoeuvre their stock prices, an Intelligence Bureau (IB) report analysing India���s financial and commodity markets has said.

The IB report in its sub-head ���market activity in specific stocks��� has mentioned the detailed plans of manoeuvring stock prices of a number of companies. These include a Kolkata-based financial company, an Ahmedabad-based chemicals company, a Bangalore-based technology company, a Hyderabad-based chemicals company, a Mumbai-based mid-sized steel company and a large metals conglomerate. It also mentions names of around a dozen brokers and market intermediaries who have played an active role in the manoeuvering.

In fact, finance minister P Chidambaram had earlier warned that strict action would be taken against market manipulators. Meanwhile, market regulator SEBI has also decided to strengthen scrutiny to weed out manipulators during this volatile period.

According to the report, which tracked manipulations in September 2008, the types of market manipulations included placement of shares in benami and front entity company names, granting contracts to brokers to play with their shares and entering into agreement to indulge in circular trading thereby leading to price manipulation.

Highlighting the alleged insider trading in a large corporate house, the report mentions how the company had announced its decision to restructure it into three vertical companies before the decision was revoked. The report has also mentioned how the share price of the company first declined and then rose dramatically despite negative views expressed by analysts.

The IB report said the stock prices had already risen by 25% on the day the company announced the revocation of its earlier restructuring plan. SundayET mailed a questionnaire to the company, but failed to get any response. When contacted, the official spokesperson of the ministry of home affairs (MHA) refused to comment on the IB report.

���Intelligence Bureau may come under our ministry, but I am not authorised to speak anything on IB reports,��� he said. The IB report also tracked commodity trends during the period and analysed the rising prices of onion and pulses, which has a bearing both on inflation and coming elections.

It said that onion prices were rising in the period July-September, 2008, on account of more demand for exports, higher stocks in storage and expectations of delayed kharif arrivals because of late sowing. In fact, the report cautioned that prices of pulses were likely to strengthen on account of a sharp decline in acreage resulting in lower production.